President Obama is taking aim at payday loans. In his weekly address, he talked about consumer protections and an important new step being taken by the independent Consumer Financial Protection Bureau to prevent abuses in payday lending.
Barack Obama making his weekly address
“While payday loans might seem like easy money, folks often end up trapped in a cycle of debt. If you take out a $500 loan, it’s easy to wind up paying more than $1,000 in interest and fees,” Obama said.
Payday loans are small extensions of credit that borrowers agree to repay in a short time, such as when they next receive a paycheck. Similar products include car title loans, in which borrowers use vehicles as collateral, and installment loans, which can be longer-term and are paid back in larger amounts.
Lenders who offer the products say they help people who are strapped for cash. But consumer advocates say borrowers often roll over or refinance loans rather than paying them back, racking up debt due to high interest rates and fees.
“If you’re a payday lender preparing to give a loan, you should make sure that the borrower can afford to pay it back first,” Obama said.
Republicans in the U.S. House of Representatives are seeking to weaken the consumer watchdog agency by rolling back the Wall Street reform that established it after the 2008 financial crisis.
Obama said he would veto legislation that would unravel that reform.
Ventuno